3 reasons why I don’t plan to buy a house
In America, we all do a lot of “American Dream” propaganda – you know, the house in the suburbs with the perfectly manicured lawn and a dog going for the morning paper.
While I’m all for having a useful canine companion, owning a home just isn’t on my plan – at least not anytime soon. Despite the cultural push towards home ownership, I’m just not convinced that owning a home is the right financial decision for my family.
Here are the top three reasons why I plan to rent for the foreseeable future.
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1. Buying a house is Dear
Almost every aspect of buying real estate involves spending your hard earned money. The most obvious cost is the down payment.
Unless you’re sitting on a big pile of cash, you probably need a mortgage to buy a residential property. To get the best chance of approval, the best interest rates, and the lowest mortgage fees, you need a down payment of at least 20%.
The median price of a home in the United States is almost $ 300,000. And 20% of $ 300,000 is $ 60,000. It’s a parcel money to be returned to the bank.
If you’re comfortable paying mortgage default insurance, you can probably get by with a lower down payment. But even if you only pay 5%, it’s still $ 15,000 in hard cash that you need to find – and be financially stable enough to do without.
Your down payment is just the tip of the iceberg when it comes to your loan. Over the life of a 30-year mortgage, you can pay six figures in interest only.
There are many other fees and expenses that are part of buying a home. For example, having your potential new home inspected before you buy it. You will probably also need a property appraisal.
And let’s not forget the closing costs.
2. Own a house is expensive too
As expensive as it is to buy a house, own real estate can be just as, if not more, expensive. On the one hand, there are property taxes. Even the most tax-wicked states of the Union have property taxes, and you are responsible for paying them even after your mortgage ends. Heck, you don’t even need buildings on your property to pay taxes.
The amount you are charged in property taxes depends on the state and county where your property is located. They are usually based on the estimated value of your property, and this appraisal is done by your city or county. The average single-family home had a property tax bill of $ 3,719 in 2020. That works out to over $ 300 per month.
If you live in a condo, townhouse, or neighborhood with a Homeowners Association (HOA), be prepared to pay more in fees. In some cases, it could be $ 50 per month to maintain the neighborhood tennis court – or it could be $ 300 per month for maintenance and landscaping.
And speaking of maintenance, be prepared to learn how to fix, well, just about anything – or pay someone to do it for you. When you own your home, a broken refrigerator means calling (and paying for) the repair technician yourself. Same thing with a clogged toilet, a dying furnace, and that raccoon in your attic. Maintenance and repairs can easily reach a few thousand per year.
3. Selling a house is also expensive
So not only does it cost a fortune of to buy a house, it can also cost a king’s ransom just for own a. But your costs don’t end there. You will also pay to get rid of the house when you are done with it.
Most houses are virtually impossible to move (except those on wheels, which have their own problems). If you want to move, you must sell your property. And selling a house is, you guessed it, Dear.
In most cases, you want a real estate agent to help you sell your home. This can be 4% or even 6% of the price of your home. An agent can help you get a higher price for your home that covers this commission, but this is not a given.
Even if you opt for DIY, there is a fee for completing the required paperwork, plus taxes to pay. And that’s before the cost of any repairs needed to bring the property up for sale.
In the end, it can cost 10% of the value of your home to sell it to someone else. And we haven’t touched on the cost of time to prepare, register, and present what goes with selling real estate.
Basically, no matter how you cut it, having your own home will cost you money. While renting isn’t exactly free, it just makes more financial sense to me right now than buying a home. I am still in favor of the dog, however.